Thursday, November 26 , 2015, 12:38 pm | A Few Clouds 60º

Miramar Developer Seeks 10-Year County Tax Rebate to Help Get Hotel Project Off the Ground

Board of Supervisors will consider the request, which Caruso Affiliated says would help secure funding for the estimated $170 million development

Developer Rick Caruso of Caruso Affiliated wants to turn the Miramar Hotel on South Jameson Lane in Montecito into a luxury resort, but the project lacks financing.
Developer Rick Caruso of Caruso Affiliated wants to turn the Miramar Hotel on South Jameson Lane in Montecito into a luxury resort, but the project lacks financing.  (Giana Magnoli / Noozhawk photo)

By Alex Kacik, Noozhawk Business Writer | @NoozhawkBiz |

The Santa Barbara County Board of Supervisors will review a rebate that, if approved, could speed up the Miramar Hotel’s demolition, according to 1st District Supervisor Salud Carbajal.

Development firm Caruso Affiliated LLC is asking for a 10-year transient-occupancy tax rebate on any new hotel that gets built on the property at 1555 S. Jameson Lane in Montecito.

Caruso’s representative, Rick Lemmo, discussed the proposal Feb. 7 before the Montecito Association Land Use Committee. He said the county would generate $1.7 million a year in property taxes and $1.5 million in sales taxes, so the rebate would effectively save the company about $15 million, according to Montecito Association executive director Victoria Greene. But the county would miss out on 10 years of taxes.

“The county is between a rock and a hard place because the community wants the buildings demolished and wants it built as soon as possible to get rid of the eyesore,” Carbajal said. “We’re trying to get that moving forward sooner than later.”

Caruso representative Matt Middlebrook said it has been difficult to secure funding for the estimated $170 million project, and the rebate would help speed up the process.

“It’s the economy,” he said. “There are no luxury hotels being built from the ground up. Look at the Bacara — people are buying fully built hotels for substantial discounts. That’s there where the money is going rather than ones built from the ground up.”

The 10-year rebate would start after four years, according to Greene. If the hotel is built in five years, it would reduce to nine; if it’s built in six, it would reduce to eight, and so on. But Greene said she isn’t sure the county will approve the rebate.

“It will take the majority of the board,” she said. “Fifteen million dollars is a lot of money, especially in these times.”

The Montecito Association, which is not an official public body but includes hundreds of members, is writing a letter to the county that endorses the Miramar cleanup and a yearlong extension of the Coastal Development Permit. The group doesn’t take a stance on the bed tax rebates, according to Greene.

“The Montecito Association supports the current efforts between Caruso Affiliated and the county to find terms that are fair and equitable to all concerned that will result in the final cleanup of the Miramar site and including extending the Coastal Development Permit by one year,” a draft of the letter reads.

But Caruso is asking for a permanent extension on permit approvals. Although most of the land-use permits are good until 2015, the Coastal Development Permit must be renewed by March 15.

“Is a permanent extension worth giving to get the site cleaned up?” Greene asked. “Because in the end that’s what the deal is.”

Middlebrook said the transient-occupancy tax rebate would manage the risk by providing a cushion for financing.

“It’s a great opportunity to move construction closer, which is a win-win for the county,” he said.

While the county would lose out on 10 years of bed tax, demolishing the deteriorating buildings would serve the community well, according to Carbajal.

“I’m hopeful that with all this work that’s gone into it, that it continues to inch forward and we can reach a win-win and it can be demolished and be a better value to the community,” he said.

Middlebrook said Caruso is looking at about $3 million to demolish the property.

According to county records, Caruso purchased the property for $52,500,000 on Feb. 21, 2007. Local investment experts said many property values have depreciated at least 20 percent since then, and with a projected $170 million development process, it would be difficult for Caruso to get out of the hole.

But Caruso has no plans to sell the property, Middlebrook said.

“We’re not going to sell it,” he said. “We plan on building it and making it a successful property. We remain firmly committed to the project. It’s great for the community and a great opportunity to bring back the Miramar. The TOT rebate is a common one in other jurisdictions and makes sense to get the project off the ground sooner rather than later.”

The Miramar had served as a historic Montecito luxury hotel since 1876, but in 2000 it closed its doors for renovations that never materialized. Caruso is the third owner trying to revive the hotel after hotel magnate Ty Warner became frustrated with the difficulty of developing in Montecito. Prior to Warner, Studio 54 co-founder Ian Schrager gave up his goal to develop the property because of financial difficulties.

“It would be an asset to the neighborhood if it got finished,” said the Rev. Jeff Bullock, rector of All Saints By-the-Sea Episcopal Church next door at 83 Eucalyptus Lane. “It’s just been sitting there as an eyesore.”

Seth Ludwick of Pacific Southwest Realty Service doubts the property will be developed.

“It’s basically undevelopable given the political climate,” he said. “It would be great to see property developed, but it’s expensive and a headache to develop it. I don’t think it will happen.”

Caruso also has shown interest in buying the Los Angeles Dodgers, joining a team with Joe Torre, as well as running for mayor of Los Angeles.

“In Rick I found a partner who understands consumers and fully appreciates that the Dodgers are a treasured L.A. institution,” Torre said in a statement. “Since moving to Los Angeles, I have seen firsthand Rick’s dedication to business and people in Los Angeles. I am very excited about this new opportunity.”

The county Board of Supervisors is scheduled to consider the rebate March 6.

“I would like to see what the community wants, that this eyesore is demolished to make the area look reasonably decent in terms of aesthetic value,” Carbajal said. “Two, I want to have that hotel built as soon as possible because it helps the economy.”

Noozhawk business writer Alex Kacik can be reached at .(JavaScript must be enabled to view this email address). Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Connect with Noozhawk on Facebook.

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» on 02.17.12 @ 12:31 PM

Hey! Caruso is super rich. How did he get there? Off the backs of the city? He bought the hotel, Let him build it with his own money!

» on 02.17.12 @ 01:46 PM

Not gonna happen, Just BobF, world doesn’t work that way. One could argue that the city (actually, the residents of Montecito and the local BANANAs cost him as much or more than he’s asking for in rebates). If investors don’t think it will make money and invest in the deal, why should he?  The carusos of the world aren’t rich because they are stupid. Two years of delay and obfuscation by the local objectionista followed by a worlwide recession and crash in travel are why it’s not built

» on 02.17.12 @ 01:57 PM

Has Carbajal ever met a wealthy developer whose nether region he hasn’t kissed?

» on 02.17.12 @ 03:27 PM

Here we go with the class envy again. Hey Bobby it was the rich that screwed this guy to begin with, get a clue.

» on 02.17.12 @ 03:33 PM

Any way you slice it, it’s still Baloney!

How many times will Montecito, and its moonbeam County supervisors, go buy a pig-in-the-poke from fast-talking, wheeler-dealer, out-of-town developers?

Caruso claims he’s a billionaire.

Claims he has enough money to buy the Dodger for up to another $1Billion. Has announced “participation” in two new development deals of “over 500Million, each” the last 18 months. Claims he has enough time and money to run for mayor of LA.

But, he claims he does not have enough time or money to keep the Miramar site
clean and repaired?

Not enough time or money to build the new hotel at that site that he requested from us, and that was approved years ago?

Claims that he can only maintain his property if the taxpayers pay him to keep
his promises, and his legal responsibilities?

And Salud-the-god is actually “seriously considering” this horse twaddy?

Supervisor Carbajal -

You spent the last four years slashing every tax-supported county public service there is, because you say we don’t have the money to sustain them.

Now you’re thinking about shifting scarce local funds to bail out this All talk-NO action LA developer?


Carbajal has been doing First District work on the public payroll for years. He
was there for Schrager’s non-hotel, for Ty Warner’s non-hotel, for Caruso’s

If Caruso wants a public subsidy to clean up the Miramar ruins, fine.

Let Salud and his whole paid staff surrender all their public salary and benefits for the rest of his term, and tithe it all to poor Mr. Caruso, if he wants to.

But, not one more penny of public funds to underwrite these fast-talking, out of
town rip-off artists!

» on 02.17.12 @ 07:54 PM

Publius, Look at what John said. That is the whole picture. You may be right about Caruso, but as John stated the rich don’t get that way by being stupid. The south coast has a propensity to smother everything we do here with exorbitant costs. Study this and study that. Run a developer through the mill a hundred times and waste years trying to figure out how to not doing anything without getting sued for illegally taking someone’s property. That is the game we idiots voted in. It’s not just the wealthy but the homeowner who wants to remodel that gets caught in this lunatic fiasco. All so we can pay the highest price for an aging, rotting termite infested built environment and pretend it’s a quaint charming little town. Most communities approach planning by actually planning, we do it by coercion, constraining infrastructure, jack booted building inspectors, myriad neighborhood meetings attended by nit wits who haven’t a clue what they are doing and the result is a hostile environment and a grid locked community being crushed under the weight of its own nanny government.

No I don’t believe Caruso should get tax money we don’t have. But if they don’t pony up he should sue the community and the county government for taking his land with out legal due process. Then leave that rotting eyesore right in Montecito’s front yard for the next two generations as a testament to our lunacy here.

» on 02.18.12 @ 01:11 AM

This would be a travesty if Caruso is allowed to hold the community hostage to more baseless promises.  A gift of public funds in the amount of $15 million?!? To a billionaire who could fund this cleanup with the change in his sock drawer? The precedent such a foolish policy decision would set would open the county and its reps like Carbajal up to outrage from existing and future hotel proprieters.
As for the Montecito Association, havent they brought enough shame upon themselves for blindly supporting Carusos plan four years ago?! Now they expect county general fund to subsidize this slick devloper? Which services should we cut? Childrend health? Public safety?  Please tell us Mr Carbajal?

» on 02.18.12 @ 05:35 PM

With the total cost per room of 3-4 times what was paid for the Bacara it seems the best alternative would to let the venture go bankrupt and sell for the $10-15M range shaving off $50-60M of cost.  And even then it would be at least 2x’s the cost of the Bacara per room.
Has Santa Barabara finally learned a lesson? Do not allow anything to be vacated or torn down until financing is in place.

» on 02.19.12 @ 02:14 PM

Santa Barbara will never learn this lesson.  The blind hatred of the local obstructionisa for so-called greedydevelopers, combined with a near total ignorance of the financial effects of regulation and delay and the operation of financing markets and the ludicrous belief that people like Caruso should pay for local delay out of his own pocket seems to be somehow incurable.  I want to keep SB beautiful too.  Ty did a beautiful job on the San Ysidro Ranch and could have done well with the Miramar, but he was hounded out by a few selfish individuals.  Lesson learned?  Nah….never….

» on 02.19.12 @ 06:45 PM

While i can understand how expensive it is to develop anything in Santa Barbara County, even a dog house, yet giving developers tax breaks that no one else gets is flat wrong. To be straight up honest this land would and should be acquired for open space and a park. Carpenteria, Santa Barbara, and Goleta have all recently not only turned back beach front (bluff) development but did so by purchasing the land from the developers. Montecito missed a golden opportunity to have a wonderful beach park on the old Hammonds Estate, now condominiums. The real problem is that the elite of Montecito do not want public parks in their community. They most certainly do not want to rub shoulders with the common people who use public spaces.

» on 02.19.12 @ 10:01 PM

Uh, no one gets a break?  Ever heard of Prop 13?  that’s where my neighbor, who sends three kids to public school, pays 1/10 of the tax I, who send no kids to school, pay.  If CA understood better the concepts of tax breaks for businesses, they would not regularly be leaving the state.

Now in this case, the Miramar land is hardly going to leave.  So either someone has to be able to fund a profitable project there, the state/county/city/ or a land trust made up from donations has to buy it, or it will sit there and rot.  Will you make the first donation?

» on 02.20.12 @ 12:42 AM

John Locke -  I for one think prop 13 is very fair.  You pay taxes bases on purchase price.  Do you get reassessed on the value of your silverware every time silver goes up in price, or your gold or diamonds or art when it gos up in price.  You pay taxes based on the purchase price. 
There is an argument that if the property is inherited it should be reassessed for taxes, but then again if the family silverware goes up in value you do not get reassessed for taxes when inheritd. You do pay an inheritance tax if the value of the estate is over the max.

» on 02.20.12 @ 01:02 PM

The original intent of Prop 13 was to ensure that older homeowners did not lose their homes due to increases in property taxes fostered on the public by a wildly spending CA government - many states do something similar and I fully support that intent and its execution. 

HOWEVER, extending that protection to heirs pushed the burden of educating those heirs children onto whoever bought their homes more recently and therefore pay a higher tax rate and is clearly a basic cause of the drastic decline in the quality of CA’s once excellent education system. 

There is no way it is “fair” for some to pay 10X the tax of a neighbor who is in a similar home.  Nor is it “fair” to expect the homeowner (in my previous example) to foot 10x the bill for his neighbor’s three children’s education.

Real property is not silverware and as far as I know real property has never been treated as such for tax purposes.  Prop 13 needs modification, but I don’t trust the policitians to touch it since none of them look beyond the next election nor do they apparently understand economics or finance.

» on 02.21.12 @ 09:23 PM

“Prop 13 needs modification, but I don’t trust the politicians to touch it”

John, I agree with that statement. You know if they are allowed to tinker with the law, your property taxes will be going up.

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